Money Matters

How Do You Define Financial Literacy?

NFEC seeks input on precisely that… and invites you to contribute

Contribute to updating the NFEC’s Financial Literacy Definition here.

LAS VEGAS, July 11, 2018 /PRNewswire/ — The National Financial Educators Council seeks to improve upon the current financial literacy definition and would value third-party input. The NFEC currently defines financial literacy as “Possessing the skills and knowledge on financial matters to confidently take effective action that best fulfills an individual’s personal, family, and global community goals.”

The term “literacy” is used loosely by the NFEC and submissions should consider the goal of financial literacy training. The NFEC contends that it takes more than “financial literacy” to help better a person’s finances. A person can be financially literate, yet lack the systems and behaviors needed to work toward greater financial security. The focus of any “financial literacy” program should be on molding positive financial behaviors and encouraging people to adopt money management processes that help them achieve their financial goals. This will be the main theme behind the updated definition.

Is There a Best Definition of Financial Literacy

What is the best definition of financial literacy? Although each financial literacy definition is varied, most have similar components. Each of the financial literacy definitions listed refer to the importance of having the skill sets and knowledge to make informed decisions.

The National Financial Educators Councils financial literacy definition also adds in a psychological component. The NFECs’ advisory board, comprised of financial professionals and seasoned educators, feel this is a critical component. The NFEC states “A lot of people know what they should do; however a good majority freeze up when it comes time to make a financial decision. Most have the knowledge but lack the confidence to make the right decision and take action in a decisive manner. Since money is directly tied to peoples emotional state we feel including this component in our financial literacy definition is critical.”

Another unique portion of the NFECs’ definition is that it includes reference to a larger impact than just ones on personal financial situation. “Global community goals” were referred to and this correlates with the NFECs’ financial education standards that include social enterprise.

Most of the financial literacy definitions we examined either directly or indirectly refer to a state of changing economic environment. The Jump$tart financial education definition goes into detail by stating “Financial literacy is not an absolute state… Financial literacy refers to an evolving state of competency.”

It takes more than "financial literacy" to help better a person's finances. A person can be financially literate, yet lack the systems and behaviors needed to work toward greater financial security...

The National Financial Educators Council provides financial education resources, promotes advocacy campaigns, and helps organizations build sustainable financial education programs. As thought leaders they produced the Framework for Teaching Personal Finance though a partnership with Danielson Group consultants to meet the specific needs of Financial Education Instructors and the National Financial Capability Strategy, which serves as a blueprint for organizations building financial education programming.

What’s your definition?

Contribute to updating the NFEC’s Financial Literacy Definition here.

The NFEC initially developed the definition to guide their financial literacy curriculum and development team. Since then, the financial literacy definition has been quoted by numerous publications and over the past two months has commonly been Google’s Featured Snippet.

Contributors’ input is valued and appreciated. Since the NFEC’s inception in 2008, they have relied upon crowdsourcing experts and professionals from around the globe to develop financial education resources. Vince Shorb, NFEC’s CEO, states, “We are grateful for the feedback and contributions of the concerned citizens around the world who take valuable time out of their day to contribute to our shared cause – pushing the financial literacy movement forward.”

The initial financial literacy definition developed by the National Financial Educators Council includes a psychological component – confidence. The NFEC contends, “Many people know what they should do; however, many make errors in judgment when it comes time to make a financial decision. Common feedback given by NFEC financial coaches suggests their clients have the knowledge but lack the confidence to make the right decision and act in a decisive manner. Since money is directly tied to people’s emotional state, including ‘confidence’ in our original financial literacy definition is important.”

The National Financial Educators Council provides financial education resources, promotes advocacy campaigns, and helps organizations build sustainable financial education programs with top financial speakers. As a social enterprise organization and thought leader, the NFEC is committed to improving financial capabilities among the global community. That means the NFEC develops tools, resources, and training to help organizations and individuals share financial literacy messages at the community level. The NFEC’s personal finance definition represents one available resource for organizations to consider when developing their financial literacy programming.